U.S. dollar is on the cusp of a historic winning streak. But how much longer can the rally last?

But already traders and currency analysts are looking ahead to next week to see if the greenback can could manage to extend its winning streak for a 13th week, which would represent the longest such rally for the index going back to 1985, the earliest data available, according to Dow Jones Market Data.

Jim Bianco, founder of Bianco Research, discussed the dollar’s prospects on Wednesday in a string of posts on X, the social media platform formerly known as Twitter.

And with Treasury yields marching relentlessly higher, helping to boost the dollar’s value relative to other currencies, this scenario is looking increasingly likely.

Traders have increased their bullish bets on the dollar in futures markets: according to an analysis of CFTC data performed by Ole Hansen of Saxo Bank, the gross dollar long-position for all non-commercial traders increased for a ninth week to the highest level in 11 months.

To put this in context, the last time traders were this bullish on the currency, the dollar index was about one month away from hitting a two-decade high. On Sept. 28, 2022, the dollar index reached 114.78, its highest level since May 2002, according to FactSet data.

To be sure, stretched positioning in futures markets can sometimes signal that an overcrowded trade could be at risk of an unwind, but for what it’s worth, currency analysts in the U.S. and Europe believe expectations that the Federal Reserve will hold interest rates higher for longer should keep the dollar supported for at least the next few months.

But beginning in 2024, the outlook gets more murky.

Recently, a team of analysts at French bank Credit Agricole led by Valentin Marinov, head of G-10 currency research and strategy, performed an analysis using data from the past 50 years to try and glean some insight into how the dollar might perform over the coming 12 months.

They concluded that it should continue to rise until the Federal Reserve starts cutting interest rates and a U.S. recession begins which they expect will arrive during the second quarter of 2024. That could give the current trend at least three to six more months of breathing room.

But beyond that, risks of a dollar retreat will increase should the U.S. economy start to slow under the weight of the Fed’s interest-rate hikes. However, the team’s current forecasts have the dollar continuing to climb against the euro
EURUSD,
+0.48%,
its main rival in terms of central bank reserves and global payments, through December 2024.

The dollar index is up 3.2% year-to-date, following a 7.9% increase in 2022. Last year, the long-dollar trade was one of only a handful of havens for traders looking for cover as both stocks and bonds sold off.